The 15-Minute Real Estate Acquisition Screening Matrix

Rapid Institutional Hurdle Filter for Residential & Commercial Real Estate Underwriting

FLOURISH MANAGEMENT

Investment Committee Directive

RESTRICTED ALLOCATOR CIRCULATION

1 THE 50% OPERATING EXPENSE RATIO RULE (NO BROKER GOGGLES)

Benchmark: Expense Ratio ≥ 50%

Mandate: Never rely on broker offering memorandums (OM) displaying 38%–42% expense ratios. True cross-cycle property operations require a minimum 50% Expense Ratio (inclusive of real estate tax reassessments at purchase price, 8% off-site property management, and realistic turnover reserves).

Effective Gross Income EGI = Gross Potential - 7% Vacancy

Underwritten OpEx OpEx = EGI × 50.0% Minimum

Sanitized Baseline NOI NOI = EGI - Underwritten OpEx

2 SUB-REPLACEMENT COST BENCHMARK ($/SQ FT & $/DOOR)

Margin of Safety Filter

Mandate: Capital is defended when acquiring physical real estate at a material discount to new construction reproduction costs. If a competitor can build modern supply across the street at a similar basis, you have zero moat.

Metro Construction Basis Current Cost: $240 - $320 / sq ft

Acquisition Ceiling Must Be ≤ 75% of Replacement Cost

Built-In Equity Moat Minimum 25% Discount to Reproduction

3 DEBT YIELD HURDLE & MANDATORY FIXED-RATE DEBT

Zero Floating Debt Permitted

Minimum Unlevered Debt Yield: 9.5%

$$\text{Debt Yield} = \frac{\text{Year 1 Sanitized NOI}}{\text{Total Loan Amount}} \ge 9.5\%$$ Protects against capital calls if refinancing cap rates expand by 200+ bps at debt maturity.

Minimum DSCR on Fixed Debt: 1.35x

Every acquisition must be structured with 7- to 10-year fixed agency or commercial bank financing. Zero short-term floating-rate bridge loans.

4 THE 4-POINT OPERATIONAL LEAKAGE AUDIT (ON-SITE WALKTHROUGH)

Value Creation Pillars

Checkpoint	Audit Focus	Value Creation Playbook	Hurdle Score
A. Utility Submetering	Are water, sewer, and trash billed to owner?	Institute Ratio Utility Billing System (RUBS). Recaptures $400-$600/unit/yr.	[ +50-80 bps Cap ]
B. Major Systems Lifecycle	Roofs > 15 yrs? HVAC > 12 yrs? Galvanized pipes?	Escrow immediate capital reserve from purchase price; demand seller credit.	[ Zero Cap Calls ]
C. Tenant Rent-to-Income	Do in-place tenants earn > 3.0x monthly rent?	Ensures rent durability during localized recessions or employment shifts.	[ > 92% Collections ]
D. 12-Month PITI Reserve	Hard cash reserves held in money market/T-Bills	12 full months of Principal, Interest, Taxes, and Insurance funded at closing.	[ Mandatory ]

Confidential // Strictly For Qualified Institutional Allocators